Clear Eyed Capitalist

Archive for January, 2010

Someone asked me today what kind of return “social” investors are willing to settle for. I hear that question often asked aloud.

-100%: I think I first heard this at SRI in the Rockies, or maybe it was from the Heron Foundation, but I’ve seen a few characterizations of donations as essentially being a social investment with a -100% financial return. From there, we can consider everything more substantial on the spectrum as long as the return discussed doesn’t involve body parts.

0%: That’s what folks get financially from Kiva. They also get photos and a story (which is often told dynamically in multiple parts). That puts them ahead of “adopting” a distant child or buying a flock of geese from Heifer where they also are getting a photo and a story but the -100% return.

Most of my readers by now have likely made at least one donation to the Haitian relief efforts, help that is urgently needed. Many intermediaries have created compilations of non-governmental organizations (NGOs) with pre-earthquake operations in Haiti, my preference because they will have existing local knowledge and relationships to aid their own effectiveness.

Conversation has already turned to the question of a long-term solution, with a spicy kick-off from columnist David Brooks in the NYT comparing the Haitian earthquake to a San Franciscan one and asserting that this is “not a natural disaster story but a poverty story.” If Haiti were not so poor, the infrastructure would not be so shoddy and the resulting negative impact from the quake not so deadly.

While researching Haitian charity, I discovered that GiveWell.net, a blog focused on non-profit effectiveness, has written a bunch on why they don’t like microfinance nonprofits, and don’t like Kiva and Grameen in particular. I’m sharing for your next idle moment that pairs with an urge to know more about microfinance as an industry!

The core criticism:
Too many organizations that lead with their financial metrics (loans made, repayment rates) over their social metrics (are clients actually better off? Is there good client satisfaction?) MixMarket, a MicroFinance Institution (MFI) research site lists 1,678 MFIs with financial data but according to GiveWell only 66 have filed social reports. They assert that profitability does not necessarily equal impact and I agree. That’s a core tenant of Social Impact investing!

I’ve got a tab that’s due for update on the online money marketplace focused more on investing and lending. That field has evolved over time as we work out the question of what’s appropriate to offer to non-accredited investors. MicroPlace came out and registered as a broker to offer securities from the get-go. Prosper started out as peer-to-peer lending but was eventually pushed by the SEC to register to offer securities. Kiva has as-yet avoided registration and the key difference seems to be that they don’t pay a return – when you lend via Kiva you don’t earn interest, so it’s not an investment.

The online marketplace for tracking and analyzing spending is also booming. Mint is a prominent example – it will link to your accounts and read the data and compile a view of your personal finances across all your accounts. Mint will then help you sent and stick to budgets by sending you customized emails and texts with updates about your spending an alerts when you hit budget limits. I found it a little creepy but they only view accounts, you can’t make changes or move money. Their business model seems to be to recommend other products and services to users and earn fees on the referrals. Mint was acquired by Quicken in 2009.

Fast Company has an interesting article about a few websites to get crowd-sourced financial advice, and a new website called Bundle that somehow mines marketing data to summarize the spending habits of people like you. Check out their article on “wanna know how your neighbors spend their money”.